Meta reports a strong Q2: ‘this is Meta specific’

Shares of Meta Platforms Inc (NASDAQ: META) jumped 6.0% in extended hours after the tech behemoth reported better-than-expected results for its fiscal second quarter.

Meta shares up on upbeat guidance

The stock is responding to the revenue guidance for the current quarter as well that topped Street estimates. Meta now forecasts its revenue to fall between $32 billion and $34.5 billion in Q3.

In comparison, analysts were at $31.2 billion. Reacting to the earnings print, Mark Mahaney – the Head of Internet Research at Evercore ISI said today:

User numbers were good. But what really popped out is the revenue growth acceleration … I don’t think internet ads are inflecting back up. This is meta specific.

He’s convinced that headwinds related to the Apple iOS privacy changes are now in the rearview mirror. Year-to-date, Meta shares are now up a whopping 150%.

Meta lowers CAPEX expectations

Meta Platforms also said in its earnings press release that capital expenditures were note expected at $30 billion this year at the top end of the range.

The multinational had previously guided for up to $33 billion. The Evercore ISI analyst added:

We’ve got these multiple product cycles. When you layer in a truly recovering ad market, these growth rates are going to be a lot higher than people thought.

Meta does, however, see an increase in capital expenditures next year as it invests more in data centres and servers to expand its footprint in generative artificial intelligence.

Meta is doing well in advertising

Other notable figures in the earnings report include a 34% year-on-year increase in ad impressions across the company’s “family of apps”. Average price per ad, though, was down 16%. On CNBC’s “Closing Bell: Overtime”, Mahaney noted:

Next quarter, they’re guiding for ad revenue growth to be north of 20% at the high end. Market was thinking maybe they’ll get to 20% by December quarter. They’re a quarter faster. That’s the big surprise.

Meta Platforms concluded its second quarter with a 14% lower headcount versus last year. Earlier this month, Mark Zuckerberg launched “Threads” to compete with Elon Musk’s Twitter (source).

Wall Street currently has a consensus “overweight” rating on Meta shares.

Meta Platforms Q2 earnings snapshot

• Earned $7.79 billion versus the year-ago $6.7 billion
• Per-share earnings also improved from $2.46 to $2.98
• Revenue went up 11% year-over-year to $32 billion
• Consensus was $2.91 a share on $31.1 billion revenue
• DAUs across its family of apps hit 3.07 billion – up 7.0%
• $10.63 of ARPU also beat expectations by 41 cents

Meta Platforms noted a 12% annualised growth in “family of apps” revenue while reality labs revenue tanked 39%. Mahaney concluded:

There are some negatives. [You’d] love to see them tap down that metaverse spending. That’s not happening. They’re telling you they’ll increase materially their metaverse operating losses. But outside of that, this looks a really good beat and raise quarter.

The analyst has a $350 price target on Meta shares that suggests another 10% upside from here.